SEC Brings GIGANTIC Insider Trading Case Against The Famous Wyly Brothers Of Texas
by ilene - August 2nd, 2010 7:57 pm
This post from Business Insider sets the stage for the next post by Cassandra Does Tokyo which discusses insider trading in general. – Ilene
SEC Brings GIGANTIC Insider Trading Case Against The Famous Wyly Brothers Of Texas

Image: www.charlesandsamwyly.com
Courtesy of Joe Weisenthal at Business Insider/Clusterstock
This evening the SEC announced a massive fraud charge against Dallas-based investors The Wyly brothers.
As Paul Murphy at FT Alphaville notes, the charge — which pertains to activity taking place over 13 years, worth $550 million — makes Rajaratnam and Martha Stewart look like small potatoes.
The gist of the allegations: The brothers Wyly (Samuel and Charles J.) used their various board seats and a network of offshore accounts to trade and conceal their holdings.
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The Securities and Exchange Commission today charged brothers Samuel E. Wyly and Charles J. Wyly, Jr. of Dallas with violating federal securities laws governing ownership and trading of securities by corporate insiders. The Wyly brothers reaped more than $550 million in undisclosed gains while sitting on corporate boards by trading stock in those public companies through hidden entities located in foreign jurisdictions to conceal their ownership and trading of those securities.
The SEC alleges that the brothers created an elaborate sham system of trusts and subsidiary companies in the Isle of Man and the Cayman Islands to sell more than $750 million worth of stock in four public companies for which they were corporate directors. They also committed an insider trading violation in one of the companies for an unlawful gain of more than $31.7 million.
Along with the Wylys, the SEC charged their attorney Michael C. French of Dallas and their stockbroker Louis J. Schaufele III of Dallas for their roles in the fraudulent scheme. French was on the board of directors at three of the companies.
"The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws," said Lorin L. Reisner, Deputy Director of the SEC’s Division of Enforcement. "They used these structures to conceal hundreds of millions of dollars of gains in violation of the disclosure requirements for corporate insiders."
According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the public companies…